How a Single Stream Inventory Strategy Enhances ROI

In a previous blog, we discussed the numerous operational benefits that omnichannel retailers gain by switching inventory strategies from one that maintains separate inventories for each sales channel to one that enables processing retail, ecommerce, and wholesale orders from a single stream of inventory.

In serving as the cornerstone of an omnichannel fulfillment solution that includes warehouse automation, system design, and algorithm-rich software, a single stream approach to inventory opens the door to increasing operational efficiencies by:

  • Reducing inventory handling requirements
  • Streamlining product flow throughout a facility
  • Multi-tasking material handling equipment
  • Enabling order fulfillment for all sales channels to be performed simultaneously

But that’s only part of the story.

In today’s competitive retail marketplace, a single stream inventory strategy sets the stage for a stronger, faster return on investment (ROI) and, therefore, becomes an essential first step in developing a leading-edge omnichannel market strategy.

Today’s omnichannel retailers walk a financial tightrope: On one hand, retailers have to make appropriate capital investments in technology to stay competitive and provide a seamless shopping experience across both physical and digital channels for consumers. On the other hand, intense competition means sales margins are thinner and investment dollars precious. Given this financial pressure, retailers are hard pressed to not only realize a good return on investment, but do so in three years or less.

Single stream inventory makes that possible in a number of ways:

Because well designed material handling systems can now be used to perform simultaneous execution of orders for all sales channels through the same system, a single stream approach to inventory eliminates the need to have three sets of the same equipment under one building roof. Using a single set of material handling systems in a distribution and fulfillment center can dramatically reduce the initial capital outlay for equipment. Smaller infrastructure footprints enable the use of smaller buildings and/or reduce construction costs for new facility. Fewer dollars spent on equipment and construction lower the hurdle rate —  the required ROI threshold for a capital project.

The financial gains from the single stream inventory approach can also include a reduction in payroll operating expenses resulting from downsized labor requirements and hiring-cost avoidance. Non-payroll operating expenses are often reduced as well, because of lower equipment maintenance requirements and lower utility requirements for running a smaller facility. And because a single set of safety stock can be used to guard all three channels against a stock out, buffer stock can be reduced, freeing-up cash that is traditionally tied up in inventory.

And then there are the benefits that are derived from the revenue potential omnichannel retailers can realize from a single stream approach to inventory: More often than not, retailers using a single stream approach to inventory can handle both a higher volume and velocity of orders in their fulfillment operation.  This enhances their ability meet service level agreement, aka customer delivery commitments, which ultimately results in greater customer loyalty, more repeat business, and a reduced need for costly new customer acquisition.

As an essential first step in providing customers with a seamless shopping experience, adopting a single stream inventory strategy provides retailers with a strategic advantage that stretches investment dollars and drives revenue through smart capital management.


Walter High is VP Marketing at MSI Automate, where he has worked since 2012.